Least Squares Regression Analysis

The controller for TG Enterprises is trying to determine whether direct labor hours or machine hours is driving the companys overhead cost. He collected the following data on the number of direct labor hours, the number of machine hours, and the associated factory overhead cost for the year 2018:

Month	Machine Hours	Direct Labor Hours	Overhead Cost
January	198	1,810	$17,610
February	195	1,825	$17,410
March	197	1,788	$17,735
April	189	1,713	$16,780
May	192	1,738	$17,240
June	185	1,463	$16,635
July	203	1,938	$17,700
August	195	1,700	$17,500
September	198	1,813	$17,775
October	207	2,100	$18,400
November	192	1,938	$16,805
December	215	2,063	$18,895

Required

a. Using Excel, run a regression on these data using machine hours as the independent variable.

Provide the cost formula for overhead cost. Round fixed and variable costs to the nearest cent.

Total cost = $ Answer + ($ Answer x machine hours)

b. Using Excel, run a regression on these data using direct labor hours as the independent variable.

Provide the cost formula for overhead cost. Round the fixed and variable costs to the nearest cent.

Total cost = $ Answer + ($ Answer x direct labor hours)

c. What is the R² for the regression in requirement a ? What is the R² for the regression in requirement b ? (Round answers to three decimal places.)

a. Answer

b. Answer

Which independent variable, direct labor hours or machine hours, is a better predictor of factory overhead cost?

Answer Direct labor hours or Machine hours

d. Assuming that expected January 2019 machine hours are 212, what is expected factory overhead cost using the cost formula in requirement a?

(Note: Round to the nearest dollar.)

$________

$Answer